Papa John’s: 3Q one of best in brand’s history

Officials of Papa John’s International Inc. said continued focus on the fundamentals would help fuel future company growth in an inflationary environment.

“From a sales standpoint to unit openings to earnings per share growth, this was one of the most solid, fundamentally sound, well-rounded quarters that I can recall,” founder and chief executive John Schnatter told analysts during the company’s third-quarter earnings conference call.

For the third quarter ended Sept. 25, Papa John’s earnings per share rose 37.5 percent to 44 cents, compared with 32 cents per share a year earlier, on the strength of same-store sales rising 5.3 percent at locations in North America and 4.7 percent in international markets.

“This increase was despite one of the toughest commodities environment’s in our company’s history,” said chief financial officer Lance Tucker.

Marketing a key ingredient

The 5.3-percent increase in North American same-store sales during the quarter comprised a 4.9-percent gain at franchised locations and a 6.3-percent increase at company-owned units.

Chief marketing officer Andrew Varga said the third quarter’s strong same-store sales gain in North America was in part due to the chain’s advertising strategy, similar to what drove a 6.1-percent gain in North American same-store sales in the first quarter.

The second quarter’s domestic same-store sales rose only 0.4 percent, however, reflecting the brand’s shift to marketing its price points, which were slightly higher than prices in commercials for either Pizza Hut or Domino’s. Varga said Papa John’s now has established itself as the chain with the premium price point, but it “doesn’t happen overnight.”

“In the third quarter, we were able to cover a couple periods with national-TV weight we didn’t have before, so that helped,” he added. “But executing our plan at a slightly premium price point over what’s now six and a half months has been effective for us. … Our goal is to always get the right price point for our quality product that we believe we deserve, and pricing is the one thing we keep the closest eye on.”

Varga added that the ongoing National Basketball Association lockout puts the brand’s sponsorship of a handful of professional teams in danger of going dormant if games continue to be cancelled. However, the company cannot yet determine the effect the lockout would have on traffic in the fourth quarter and beyond.